Mumbai, April 8 -- The Reserve Bank on Wednesday projected India's GDP growth for the current financial year at 6.9 per cent, lower than 7.6 per cent estimated for 2025-26, amid elevated commodity prices and supply chain disruptions originating from West Asia crisis.
Unveiling the first bi-monthly monetary policy for 2026-27, RBI Governor Sanjay Malhotra said the merchandise exports may be adversely impacted by disruptions in key shipping routes and the concomitant rise in freight and insurance costs. On the other hand, sustained momentum in the services sector, the persisting impact of GST rationalisation, rising capacity utilisation in manufacturing, and healthy balance sheets of financial institutions and corporates should continue to support domestic demand, he said.
"India's macroeconomic fundamentals exuded confidence with buoyant growth and low inflation. Conditions turned adverse in March with the widening of the conflict zone and its intensification," Malhotra said.
He emphasised that the fundamentals of the Indian economy are on a stronger footing at the current juncture than in previous crisis episodes, as well as relative to many other economies, providing it with greater resilience to withstand shocks. The Governor said higher input costs associated with an increase in energy prices and international freight and insurance costs, along with supply-chain disruptions that would constrain availability of key inputs for downstream sectors, would impair growth.
Also, the government has taken several measures targeted at supporting exports and protecting supply chains. This should mitigate the adverse impact of the conflict.
"The Monetary Policy Committee (MPC) opined that the intensity and the duration of the conflict and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks," he said. Taking all these factors into consideration, the RBI said real GDP growth for 2026-27 is projected at 6.9 per cent, with Q1 at 6.8 per cent; Q2 at 6.7 per cent; Q3 at 7 per cent; and Q4 at 7.2 per cent. He also said merchandise exports may benefit from the recent trade agreements, while services exports are expected to remain resilient.
'Excessive speculation led to rupee movements'
The Reserve Bank said "excessive speculation" on the rupee prompted surprise actions on the currency front in the last fortnight, but clarified that its measures will not remain forever. "In the last few weeks of March, we have witnessed heightened volatility in the foreign exchange market. These measures are reactions to the specific market movements. They are not signalling any structural changes. These are not measures going to remain forever," Malhotra said in a post-policy press conference.
Deputy Governor T Rabi Sankar said there was an "artificial drying up" of supply in the market during those days, which led to the measures.
The comments from the apex bank came for the first time after it capped NOP-rupee positions in the onshore deliverable market at USD 100 million and barred authorised dealers from offering non-deliverable forwards. The first measure helped the local currency to appreciate sharply, but gains were reversed within a few hours of trading. The second measure, stopping authorised dealers from offering NDF, helped the rupee significantly, and it appreciated over 2 per cent in a single day.
Published by HT Digital Content Services with permission from Millennium Post.